April 25, 1919

L LIB

Daniel Duncan McKenzie (Leader of the Official Opposition)

Laurier Liberal

Mr. McKENZIE:

All I have to say in regard to the proposition is that in Nova Scotia we had a provincial insolvency law which contained a provision such as the hon. gentleman (Mr. McLean) has suggested, and by reason of the way in which it was abused the provision was repealed and we reverted to the condition under which only a regularly appointed trustee can be chosen to manage the estate. We found that in certain sections fictitious accounts would be made out. Certain parties would get together and create the 4 p.m. condition under which they appeared to own more than half the value of the estate, and in any case where they wished to do so, would override the other parties concerned and appoint their own man. I am simply stating that so that the Solicitor-General may know that in our province the experiment has been tried and abandoned.

Topic:   BANKRUPTCY ACT.
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UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

There has been considerable difficulty in Ontario on the same question.

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Mr. MOW AT@

Before the amendment is further considered, let me point out a trouble which may arise and which we endeavoured to avoid when considering the Bill in Committee. Suppose there were two or three large creditors of an insolvent. They might vote in an outsider, who was friendly to them, and they might get away with the state in that way; whereas if the management is left to an authorized trustee, his reputation and business will be such as to render him absolutely unprejudiced and not favourable to one party or the other. It was brought up in Committee, when the Bill was under consideration, that one or two powerful or influential creditors might influence the winding up of the estate so that the small creditors would come out at the small end of the horn.

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UNION

William Foster Cockshutt

Unionist

Mr. COCKSHUTT:

If I understood the hon. member for Royal (Mr. McLean) correctly, he believes that one creditor, who might own three-fourths of the liabilities, and wished to change the trustee, should be able to do so. We have already adopted

a clause that I think would interfere with that, and which requires that there should be a majority of the creditors, in such a case, as well as two-thirds of the amount of the debts involved. Surely it would be putting a great deal of power in the hands of one creditor to do as suggested. He might happen to be a very large creditor, but the others might be very much less able to lose the amount at their disposal than the big fellow who would probably swing the estate as he wished, and control everything if he individually was allowed to appoint a trustee. It appears to me there ought to be some safeguard in connection with this matter, and it should not be in the power of one individual, who may be the largest creditor, to swing the whole thing as he pleases.

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UNION

Hugh Havelock McLean

Unionist

Mr. MCLEAN:

In drafting the amendment that objection can be easily met.

I think the Bill should contain a provision that the creditors-a majority if you wish-should take control of the debtor's estate and put it in the hands of any person they think would be capable of winding it up to the best advantage. 'Such a provision would be especially applicable in my province, because, as I mentioned, we have not a sufficient number of skilled people to draw on in cases of this nature, and in out of the way places it would be necessary to secure a local man possessing the necessary qualifications. I think the principle is correct; the estate belongs to the creditors, and they should have control of it, rather than the Government should put A. B. in control because they have appointed him an official trustee. Under the old Act there was never any difficulty about the assignees appointed by the creditors; the difficulty always was with the official assignee. He was the man who made away with the estate.

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UNION
UNION

Hugh Havelock McLean

Unionist

Mr. McLEAN:

When the official assignee got control of an estate you could not get an accounting from him.

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UNION

Avard Longley Davidson

Unionist

Mr. DAVIDSON:

Is it the intention of the hon. member for Royal (Mr. McLean) that this trustee, appointed by a majority of the creditors, should give 'two bonds?

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UNION

Hugh Havelock McLean

Unionist

Mr. McLEAN:

Yes, it is already provided for I think by section 14, but we can see that the other sections are sufficient to require that the trustee appointed shall give the necessary security.

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UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

My hon. friend (Mr. McLean) states that the creditors should be put in control. That is not altogether

the intent of this Bill. The object of a Bankruptcy Bill is to protect the debtor too, and, unlike any provincial legislation on the subject, this Bill provides under certain conditions for the discharge of the debtor, and the trustee has to represent the debtor in these matters, so that he is not altogether a trustee for the creditors. In^ fact, it has been argued that one great object to be attained by a Bankruptcy Act in Canada is the discharge of the honest debtor, and the trustee must act for him in that connection. However, in framing the clauses in regard to the appointment of trustees and the security to be given by them the Committee was influenced not only by representations made by Canadian mercantile bodies, but also by the arguments of exporters from Great Britain. Delegations representing them called upon me, and they were very insistent upon the question of official trustees with undoubted security. They say that as a rule they are minority creditors, and their experience in Canada has been very disappointing, that many times where dividends were declared out of small estates they got nothing-.the dividends were never paid. They think our legislation in the various provinces has been highly deficient, and I must say that they are perhaps more insistent than any other mercantile interest doing business in Canada.

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UNION
UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

Every appointment in

England must be submitted to the court for ratification.

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UNION
UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

Those exporters say

that if something is not done to regulate insolvency proceedings in Canada, it is ultimately going to injure our credit. The Committee had these matters brought before them and were very much impressed by that state of affairs, and I have no doubt that in framing these sections the main idea was to have an official class of trustees thoroughly approved and thoroughly secured.

I would not like to see any departure from the course adopted by the Committee, but I appreciate the reasonableness of my hon. friend's contention, and if he will let me have his amendment I will consider it.

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L LIB

Arthur Bliss Copp

Laurier Liberal

Mr. COPP:

I was not present yesterday afternoon when this Bill was under discussion, and the Solicitor-General may have made the explanation that I am asking for now. I think a great deal depends upon

my hon. friend's suggestion as to how many authorized assignees are appointed in the province or how closely they are located.

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UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

The committee purposely refrained from placing any limit. We do not know, and we will not know, until we gain experience, just how many trustees will be necessary to administer this Bill. It was supposed that one or two in each county might be sufficient, but of course in large centres more would be required. However, the door is wide open; any man can make his application, state his qualifications, and give his security. I do not know how many will apply. This strange situation might arise: After this

legislation is enacted no man may apply; then there is no machinery for carrying out the provisions of the Act. I will have to make a suggestion in that regard, that the Act do not come into force until proclamation by the Governor in Council, because machinery will have to be adopted after the Bill is passed, forms will have to be prepared and rules of practice prescribed, and we will have to see to it that an adequate number of qualified trustees are available.

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L LIB

Edmond Proulx

Laurier Liberal

Mr. PROULX:

What will be the form of security, by private surety or security bond?

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UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

There is nothing in the Bill to preclude private sureties, but the bond has to be to the satisfaction of the Governor in Council. In Ontario the practice of the Government has done away with all private sureties.

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L LIB

John Howard Sinclair

Laurier Liberal

Mr. J. H. SINCLAIR:

Do I understand the minister to say that no trustee will be appointed unless he applies for the position?

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UNION

Hugh Guthrie (Solicitor General of Canada)

Unionist

Mr. GUTHRIE:

He must himself apply to the Secretary of State.

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April 25, 1919